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Multivariate Stochastic Volatility

Manabu Asai, Michael McAleer and Jun Yu ()

Microeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: The literature on multivariate stochastic volatility (MSV) models has developed significantly over the last few years. This paper reviews the substantial literature on specification, estimation and evaluation of MSV models. A wide range of MSV models is presented according to various categories, namely (i) asymmetric models; (ii) factor models; (iii) time-varying correlation models; and (iv) alternative MSV specifications, including models based on the matrix exponential transformation, Cholesky decomposition, Wishart autoregressive process, and the empirical range. Alternative methods of estimation, including quasi-maximum likelihood, simulated maximum likelihood, Monte Carlo likelihood, and Markov chain Monte Carlo methods, are discussed and compared. Various methods of diagnostic checking and model comparison are also examined.

Keywords: multivariate stochastic volatility; asymmetry; Leverage; thresholds; factor models; time-varying correlations; transformations; estimation; diagnostic checking; model comparison (search for similar items in EconPapers)
JEL-codes: C02 C73 (search for similar items in EconPapers)
Date: 2006-01
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Working Paper: Multivariate stochastic volatility (2007) Downloads
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